https://www.marketwatch.com/story/godfather-of-chart-analysis-says-damage-done-to-the-stock-market-is-much-much-worse-than-anyone-is-talking-about-2018-10-30
Godfather of Chart Analysis Says Stock Market 'Damage' Is 'Much, Much Worse' Than Many Think
Mark DeCambre, MarketWatch
Oct. 31, 2018 11:59 am ET
Prominent market technician Ralph Acampora says the stock market is in bad shape, and it's worse than many on Wall Street investors appreciate.
A pioneer in the field of chart-based trading, Acampora says the technical damage that resulted in the Dow Jones Industrial Average and the S&P 500 erasing all of their gains for 2018, and the Nasdaq Composite falling into correction territory—usually characterized as a decline of at least 10% from a recent peak—will take months to repair.
"From a technical perspective, the damage that has been done technically to the stock market is much, much worse than people are talking about," he said in a phone interview on Tuesday.
Acampora cited a breakdown of the so-called FANG stocks—a quartet of technology and internet-related companies that include Facebook (FB), Amazon.com (AMZN), Netflix (NFLX), and Google parent Alphabet (GOOGL)—as the clearest sign that the worm has turned on the bull market.
On Monday, those names, which have been significant catalysts for market sentiment and price moves, shed a combined $120 billion in market value. On top of that, Amazon became the most recent of that group to close in on bear-market territory, defined as drop of at least 20% from a recent peak.
"I've been a bull for a long, long time, and like everyone, I was waiting for a correction, but this is something different," says Acampora, who many chartists refer to as the godfather of technical analysis.
"All the leadership is getting crushed," he says.
Acampora says he believed that the entire stock market itself would go into a bear market and that the current dynamic in the market was eerily similar to the stock-market crash of 1987, when the Dow slid a historic 22.6% in a single day on Oct. 19.
"Honestly, I don't see the low being put in yet, and I think we're going to go into a bear market," he says. He speculates that the market may not be healed until around the first quarter of 2019.
The Dow would have to fall another 3,162 points, or about 13%, from current levels to close 20% below its Oct. 3 record close of 26,828.39, as of late afternoon Tuesday.
The market technician says he was painting his barn to avoid "the agony of watching" the market's gyrations. "I don't want to watch the market get sloppy again, so I figured that I'm better off painting."
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Acampora isn't alone in his bearish view. Michael Wilson, Morgan Stanley's chief U.S. equity strategist, says he believes the market is undergoing a "rolling bear market." He was among the first to spot fractures in the market's uptrend.
To be sure, other analysts believe the market is returning to normal and has just entered a more volatile phase due to interest-rate increases by the Federal Reserve, which has lifted borrowing costs for corporations and individuals and prompted a broad reassessment of stock values. That factor, among myriad others, has rattled investors' sentiment.
Tom McClellan, publisher of the McClellan Market Report and another high-profile chart technician, says that the current action is more a function of seasonal volatility associated with October and not a more significant upending of a 10-year bull market. He says stocks are oversold and remains bullish on the stock-market outlook.
This article originally appeared on MarketWatch.